Kazakhstan in talks with China to increase natural gas exports

Kazakhstan is negotiating an increase in natural gas exports to China, including through a new pipeline, Bloomberg reported, noting that this would put Kazakhstan in competition with Turkmenistan and Russia.

“Despite reports of an economic slowdown in China, gas demand continues to grow,” Sanzhar Zharkeshov, chief executive of Kazakh national gas operator QazaqGaz, told Bloomberg. “We hope to reach a consensus on increasing our export volumes to China and possibly to other countries such as Uzbekistan.”

To date, natural gas exports from Kazakhstan to China are quite modest, at 4 billion cubic meters annually. This represents almost all of the country’s natural gas exports, which stood at just over 5 billion meters as of December last year. For context, Kazakhstan itself consumes 21 billion cubic meters of gas annually. However, the country wants to boost both domestic and export supply for additional revenue. China is the natural top target for these additional revenues.

To enable higher exports, the Kazakh state is working with oil and gas producers in the Caspian Sea to motivate higher production. One measure to do this is a new gas price formula, QazaqGaz’s Zharkeshov told Bloomberg. The government also plans to increase production by 3.5 billion cubic meters annually over the next five years with the help of Qatari investors, the Bloomberg report said.

Increasing exports to China would require the construction of a new pipeline link to an already existing pipeline that is only being used at 70% capacity. The new pipeline would cost between $3 billion and $6 billion, according to Zharkeshov. The decision on whether to continue the project will be made later this year, and construction will take between two and three years.

China became the largest importer of liquefied natural gas last year, taking in the equivalent of 16 billion cubic meters per day, the US Energy Information Administration reported in August. Pipeline imports are an important alternative source of gas for the Asian plant as demand continues to grow.

By Irina Slav for Oilprice.com

More top reads from Oilprice.com